Economy Killed the New Pay-TV Star? By Frederick Sowah

Economy Killed the New Pay-TV Star?

By Frederick Sowah

Published on Wed, Mar 18 2009 by Frederick S.

These days when you ask many a wife of an avid African sports fan the question “Does your husband go out a lot?” I reckon the responses usually begin with long sighs followed by sentiments involving a popular pay-TV company that went bust at the beginning of this year.

For several years in many African countries the only quality choice for great entertainment TV was the South African-based DStv MultiChoice. In the same way that not too Americans can comfortably afford the pricey Home Box Office (HBO) service, not too many people in the Africa can/could afford DStv. So when Gateway Broadcasting Services (GBS) took the continent by storm in 2007, they were welcomed with open arms (and with joyful Zulu ululations, friendly Masai spear-throwing, and spontaneous Ashanti adowa dances, etc., I imagine). It seemed the prayers of many families, who for a long time had yearned for a classy alternative to drab programs on free-to-air local television channels, had been answered.

For the price they charged, GBS offered quite a good viewing variety, with its most comprehensive and expensive package going for less than forty dollars. This attractive price/quality combo enabled GTV to amass an estimated 100,000 subscribers in twenty-two African countries. In Uganda, Tanzania and Ghana, the pay-television channel bought the title rights to broadcasting domestic leagues across the continent. In return, it funded the Tanzania league to the tune of $600,000 and invested $500,000 in the Council of East and Central Africa Football Associations (CECAFA) tournament every year. GTV’s sports fans could also watch live games from top leagues in England, Italy, Germany, and other parts of Europe and South America. In addition to its generous sporting broadcasts, GBS gave its viewers news channels like BBC and Al-Jazeera, entertainment channels such as Black Entertainment Television, MTV Base and E!, and the children network Nickelodeon, as well as African-produced television series such as Generations.

On 30 January 2009, subscribers to GBS’s TV service (GTV) were confused when they received a brief on-screen notice that GTV was going to stop transmission that same day. Customers that suspected a prank checked their calendars to make sure they were still in January, not April. Those subscribers who did not see that single warning message came home after a hard day’s work to discover that their prepaid TV service that had been working perfectly well that morning was gone, leaving behind a mute, blank screen.

There are a number of theories surrounding GBS’s bankruptcy. Some say that GBS paid too much to for the rights to broadcast live English Premier League games, allegedly bidding as much as three times what DStv was willing to pay for the same rights. GBS was awarded 80% rights, DSTV settled for 20%. I suppose GBS was banking on the popularity of the English Premier League, as well as the allure of drastically cheaper prices, to capture some of DStv’s existing customers. They failed in that attempt. Some conspiracy theorists also contend that GBS was a sham from start, and that the company came into the market with a predetermined exit plan. In short, GBS was all about getting as many subscribers to sign on for year-long and other long prepaid contracts, and then bolting with the money. (Several proprietors of hotels, restaurants, sports and drinking bars, and video cinemas had made significant advance payments for the TV service.)

The aforementioned theories make sense. In the vulnerable, innovation-starved, foreign entrepreneur-embracing African service industry, it doesn’t seem to take much to obtain licenses to operate businesses, since governments want to be seen to be foreign investment-friendly. The total lack of or dearth of many modern services in Africa thus causes every new foreign venture into the African markets to be hailed as godsend. Hopefully, African governments and their agencies will in future perform adequate project-feasibility checks on large-scale entrepreneurship moves in their countries to prevent their citizens from being swindled. One also wonders how GBS thought they could charge such relatively lower (compared to DStv) fees and still stay afloat. According to a Bloomberg report, GTV needed 400, 000 subscribers to break even, compared to the 100, 000 subscriber base they had at the time of dissolution. The explanation from GBS management explaining the company’s collapse was terse—they couldn’t raise enough money to continue operations. If this explanation were true, then the GBS collapse seems to be one of the most visible and direct effect of the global economic crisis on the continent.

But not everyone is saddened by the collapse of GBS. DStv was the biggest winner at the end of it all, after being offered (and accepting) the 80% rights albatross GBS wore on its neck. However, unlike the South African-based monopolists, the wives of ex-GTV-subscribing football fans are not all smiles over GBS’s failure.Over the past year, their husbands’ excuse of “I am going to watch an important game” did not hold water, because GTV brought the games live to their homes. With GBS and GTV gone, the women can only helplessly watch as their husbands step out every other night (and all day on weekends) to go enjoy “the game.”